The Long Term Investor

As to this little article......NO I DONT THINK SO....but I will post it anyway since it reflects a legitimate view of the....possible....future.

It's time to play defense as the bull stock market turns two years old: analyst

https://finance.yahoo.com/news/it-i...et-turns-two-years-old-analyst-195424430.html

(BOLD is my opinion OR what I think is important content)

"The S&P 500 (^GSPC) just had its best 12-month performance ever — up 80% as of the end of March. But the bull market may be entering a new phase as it turns two years old — an investing regime that requires a bit more defense.

"It's definitely hard to say that we're going to see 80% gains in the second year. But we think that it's even harder to say that the market is going to rally with the momentum it's had recently — for a few different reasons," says Callie Cox, senior investment strategist at Ally Invest, on Yahoo Finance Live.

She explains that over the last three quarters, we've been in a "low expectations" market — one fueled by big earnings and economic beats. "[R]eal earnings growth has beaten estimates by 10 percentage points because estimates were that low. And going into Q1, estimates are high again ... [W]e think investors could get a little confused as they see real earnings growth come in that's not quite as high compared to estimates... So it's really like a mind shift that we're dealing with," says Cox.

This is not a reason to get bearish — only to tame expectations for the next year of returns. According to Ally Invest calculations, there have been nine times when the 12-month rolling return on the S&P 500 was 30% or more since 1950. According to Yahoo Finance calculations, these periods yielded a median gain of 34% and an average gain of 40%. In the year following these returns, all were positive (and no bull market has ever ended in year two, notes Cox). However, profits were more muted, with a median return of 11% and average return of 13%. The S&P 500 is already up 9.7% this year.

"t's typical for the bull market to lose a little bit of steam going into year two. And that's going back to the low expectations, high growth kind of thing. Expectations start rising and makes it harder for the market to ... beat everybody's expectations. And that leaves a greater chance for disappointment. And to be clear, again, we're not calling for doom and gloom. We just think the market is due for a breather up in the next quarter or two," says Cox.

If stock market returns are to come back in line within historical norms, Ally recommends gaining exposure to more defensive sectors, such as utilities and consumer staples.

"We've seen less of the recovery gains go to those sectors. And those are the types of sectors that can do well when the market kind of stagnates or if it sells off. Those are defensive. So investors typically rush to those areas," she says.


S&P Select Consumer Staples SPDR Fund (XLP) and S&P Select Utilities SPDR Fund (XLU) vs. S&P 500 since the March 4, 2021 recent bottom in the index
The above chart shows that since the interim market bottom on March 4, the S&P 500 has gained 9.5%. The performance of the S&P Select Consumer Staples SPDR Fund (XLP) nearly matches it at 9.2%, and S&P Select Utilities SPDR Fund (XLU) surpasses it, clocking in at 10.6%.

Cox doesn't believe investors should count out tech (XLK) either, which staged a big comeback last week after lagging most of the year. "We're feeling a little less optimistic about tech, just because it's gained so much. And in a high growth environment, growth stocks like tech stocks typically don't do as well. But then, again, the market has surprised us a lot over the past year or so. We are optimistic on tech longer term," says Cox."

MY COMMENT

I do believe that we are seeing WAY OVERBOARD expectations at the moment. AND....that is a bad thing when great earnings have the potential to be disrespected. BUT....the past year was an ABERRATION due to the mandated.......I should say moronic..... economic shut down. I dont think you can draw any comparisons with the current year to ANY past year. there has NEVER been a time like the current time......in history.

As to defensive stocks.....I happen to LIKE the big cap tech as much as consumer staples. these companies are the guts of the entire US economy....including the consumer economy. Many of their products are now....necessities....and....new era consumer staples.

 

BIG TECH....seems to be doing fine...except for Google and Apple. BUT...the smaller tech and smaller cap stocks as reflected in the NASDAQ.....going through a rough patch right now. Just a little mini-correction.

I DOUBT that bank stock earnings are going to help the NASDAQ this week. BUT as we get into the GUTS of the earnings, things should turn around.

You were kicking butt back 2-5 weeks ago.....time to give a little bit back on a temporary basis.

 

Dont worry Zukodany.....being cautious is not a bad thing.

People think they can just BUY any dip.....people are used to the fact that we have had an AMAZING recovery in 2020.....on top of a historic 10 year BULL MARKET run. People have gotten SPOILED........and have LOST ALL AVERSION to market PAIN. In fact probably....HALF....the people investing right now.....have NEVER invested outside of a HISTORIC BULL MARKET.

I like to be positive and cheer-lead on this thread.....because I DO have a very long horizan....and.....I STRONGLY believe in the POWER of long term investing.....and....I do not EVER need to use my stock market money.......and....my retirement is set. I definately consider the NEGATIVE a lot more than I consider the positive...when I am going to make a move. Like EVERYTHING in my business life....I evaluate the WORST CASE and the BEST CASE. I make sure I can live with the WORST CASE.

SOONER or later we ARE going to have a really nasty, long term correction.....we will also sooner or later have a really nasty BEAR MARKET....and...it will last for 1, 2, 3 years. That is just the REALITY of being an investor. I accept that and in my case...it is not an issue....I have been a fully invested investor for many decades. I have EXPERIENCED the EXTREME PAIN......a number of times in the past. It is EXTREMELY unpleasant......but.....it is part of a normal market process.

You will always have many opportunities to buy whatever it is. It does not hurt to be cautious.......missing a buying opportunity is not the end of the world.......especially if you are playing with retirement money or other critical savings.

Personally........I am used to dealing with large sums of money from my business life and my investing life for over 45 years now....I am used to handling and investing money for family members....it just does not bother me and it is NOT stressful.....because I have been doing it for a long time....and my family members trust me and NEVER second guess.

BUT....for the average investor....it is EASY to have sort of a caviler attitude when you are playing with a few thousand dollars...or even ten, twenty thousand.....but get up to where you are playing with $500,000....or $1,000,000......or $1,500,000....and it is a whole different ball game when your account LOSES 40%....or...50%.....or 60%....and goes through a 3 year BEAR MARKET........with NO END IN SIGHT.

SO....a little CAUTION is NOT a bad thing......for any investor......it is NOT just a big game.

 

NOW....having said that.....futures are UP and the Asian markets are UP. We are about to start one of the GREATEST EARNINGS runs over the next 3-4 quarters in business history.......compliments of the economic shutdown.

 

Great comments above guys. So true.

AND......we open with a nice moderate rally in most of the averages. I am sure there will be the TYPICAL.....UP and DOWN....all through the day that we have been seeing lately.

I have the same memory as you....oldmanram......bank reporting week is usually a semi-bust.......never gets any respect.

Zukodany.....I would not be in a rush to put money into the markets if I was you. You have good focus on your business and real property and that is a good thing. You now have a real nice diverse mix with stocks, real property and your businesses. No reason to go OVERBOARD.....during what will probably be the most BOOMING market in many decades.

 

HERE is a great little article that touches on most if not all of the recent topics in this thread.....and....emphasis on the long term. A real CLASSIC.

Weekly Market Pulse: Nothing To See Here. No, Really. Nothing.

https://alhambrapartners.com/2021/04/12/weekly-market-pulse-nothing-to-see-here-no-really-nothing/

(BOLD is my opinion OR what I consider important content)

"The answer to the question, “What should I do to my portfolio today (this week, this month)? is almost always nothing. Humans, and especially portfolio managers, have a hard time believing that doing nothing is the right response….to anything…or nothing. We are programmed to believe that success comes from doing things, not not doing things. And so, often we look at markets on a day-to-day or week-to-week basis and think something of significance happened and we ought to respond to it. Most people, according to this recent article in Nature, “consistently consider changes that add components over those that subtract them — a tendency that has broad implications for everyday decision-making.”. That is certainly obvious in most of the investor portfolios I’ve reviewed over the years which tend to look a lot like a financial episode of Hoarders.

What happened last week? Nothing. Or at least nothing of significance. Yes, there were some economic reports and the Fed released the minutes of its last meeting – as if everyone on the planet doesn’t know what Jerome Powell had for breakfast and that he isn’t raising rates until some really pricey cows come home. Well, actually, I guess it is IF some really pricey cows come home. The PPI report last week didn’t make a ripple in the markets, but the commentariat was all on Twitter about inflation and economic overheating and whether Powell might raise in rates in 2 years or 3. The market was not impressed. The 10-year Treasury yield moved all of about 1 basis point last week while the 10-year TIPS moved, hold onto your hat, 5 basis points. Gold was up less than 1% and the dollar “plunged” (as one website put it) by 0.85%. There was obviously nothing in the data released last week that wasn’t already expected or dismissed for some reason. No surprise, no change in outlook, no change in markets, and no reason to do anything but read and research, which is how I spent my week.

There were some interesting things going on last week and there was some interesting data released even if it didn’t move markets much. Jobless claims continued to defy the consensus view that the US economy is recovering robustly. Now, it does seem to be a bit of an outlier in that regard, so it may be that there is something wrong with the data. Or maybe – I’m just thinking aloud here – when you give people a bigger incentive to file for unemployment benefits, like another $300/week, well, they do. What do they have to lose really? They might get turned down? My Dad always told me you don’t generally get what you don’t ask for so I’ve never been shy. And apparently neither were some 744.000 souls who asked for benefits last week. Will they all get what they ask for? Probably not, but given the efficiency of state unemployment systems, their odds probably aren’t that bad. Jeff did a thorough rundown of the jobless claims divergence here.

We also saw unions lose their bid to unionize an Amazon warehouse in Alabama, which I don’t think was all that surprising but may have produced a market reaction if it had gone the other way. A lot of states have moved ahead with state minimum wage hikes rather than wait for a national change, which has the inflation worriers worried. Rising wages is one of those double-edged swords, no doubt good for the folks getting the raises and probably not very good for the companies who have to pay them or the consumers who buy the products they produce. Maybe. Suffice it to say the argument over higher wages is all bundled up in the inequality debate and there isn’t a one-handed economist anywhere. Still, I think there was some worry out there about President Biden’s obeisance to unions and what impact that might have on inflation and profit margins. Unions only represent a little over 10% of American workers – most of whom work for government – so they don’t have much way to go but up. The loss in Alabama was decisive – 71% against – so I’m going to assume that Amazon workers are pretty comfortable with their employment situation. Wages are rising without more union participation though, so the inflation fusspots may be onto something – eventually.

We will start to see, over the coming weeks, whether the economy is really going to slingshot out of the COVID hole. Sentiment seems overwhelmingly positive with almost everyone assuming we’re about to put up some big growth numbers and of course, we may. But that’s already reflected in today’s market price (with some notable exceptions like bonds but never mind that). Markets – individuals – are already thinking about what happens after that, after everybody goes out to dinner and takes a trip or goes to a baseball game or throws a party. What then? Or what if, God forbid, we get another wave and the re-opening boom is delayed again? Or what if we do get a surge in services spending – leisure activities – but it’s offset by a pullback in goods spending? Markets would, as they say, adjust. But there was no new information last week to move the debate and markets reacted accordingly. So, be patient and don’t just do something, sit there.

Last week’s economic data didn’t move markets but it did have some interesting bits. The ISM Non-Manufacturing PMI hit an all-time high which further supports the boom narrative. It might not be a great omen for stocks though; high PMIs are actually associated with lower future stock returns. Job openings also hit an all-time high even as jobless claims rose again. Exports fell while imports were flat, reinforcing the idea that the US, even if it isn’t all that great, is a lot better than the rest of the world. The wholesale inventory report was interesting too, as the inventory/sales ratio fell significantly. Traditionally one thinks of a falling ratio as being a good indication for future production and that is probably right again. But needing to build inventory and being able to do so are not the same thing. Supply constraints are popping up everywhere and sales are rebounding. Which is exactly what you would expect from a supply shock like COVID-19. Textbook stuff in fact. If we open as fast as the consensus seems to expect, we can probably expect to see more shortages and maybe some price increases. The rest of the world’s COVID issues will not be confined to the rest of the world even if the virus is.





We get a lot of data next week, including more inflation data which will no doubt be blown out of proportion. Retail sales should give us a glimpse of how the re-opening is going. We’ll also get a look at housing starts, which weren’t very good last month.







As I said, markets were quiet last week. In fact, the volatility index (VIX) fell to 16 and change, the lowest it has been since before the virus started shutting things down last year. Large-cap growth stocks did have a good week but are still losing YTD. The value versus growth debate didn’t change last week. There is still plenty of scope for further gains in value relative to growth as the reversion to the previous trend continues:



Emerging market stocks were down last week, continuing a correction that started in February. EM was driven by China, down 2.2% on the week, while many other emerging markets were higher. Latin America, despite Brazil being a complete mess on COVID, was up over 2% on the week. Commodities, down over the last month, are still the leading asset class YTD with small-cap right behind. Both of those have been correcting a little lately, but nothing that is a trend changer.







Energy was the only sector down last week but like commodities generally, this is just movement within the trend. Nothing has changed. There’s been a lot of talk about the performance of energy and financials this year, the former a beneficiary of re-opening, the latter responding to a steeper yield curve. What is interesting is that we’ve heard almost nothing about REITs whose performance is slightly better than financials and only a little behind energy. Real estate is also, obviously, a beneficiary of re-opening. And while retail may never be the same, I expect office to do just fine. Companies want employees in the office and I think just about everybody is sick of working from home. There are some nice things about WFH but maybe it’s better on a part-time basis.







There are always things to do as an investor. Research needs to be done. Proxies need to be voted. Earnings reports need to be reviewed. But that doesn’t mean you need to buy or sell something. Resist the urge to micromanage your portfolio; the correlation between activity and performance is negative. Besides, it’s spring. Go outside. Smell a flower. Have a picnic. And don’t worry. You won’t miss a thing."

MY COMMENT

Good stuff above.....much of it....if not all....discussed in this thread.

BUT.....for now it is all about.....EARNINGS, EARNINGS, EARNINGS. Economic data is not going to matter, media blather is not going to matter, politics and government insanity is not going to matter. ALL that matters for the next weeks is EARNINGS.

Thank goodness we get the banks out of the way first and can move on to companies that ACTUALLY produce products and services that have some value to the normal person.

 

WELL......I see that the national media is now paying attention to the INSANE HOT housing markets round the country.......something that has been talked about on this thread for many months now. I heard comment on two national morning business shows today. No doubt....as the media talk spreads.....the MANIA will become more and more extreme.

AND.......I now...actually....have eight shows on my calendar for the next three months. A RECORD HIGH for the past 12 months since everything closed down. The REOPENING continues.

 

Well....either ALL the data and research on trading and short term investing is WRONG......or......who knows.

An age old....argument.....on investing boards. The bottom line.......if it is your money....do what you wish. Why would I argue with someone about what their opinion is or what they wish to do with their own money? EVERYONE should invest EXACTLY as they wish.......BE TRUE TO YOURSELF.